Is President Trump already winning the trade war with China?



After months of threats and gamesmanship, President Trump’s tariffs on $34 billion worth of Chinese industrial imports took effect a minute after midnight Friday. It’s the latest in a line of protectionism aimed at the U.S. trade deficit with China, which rose about 8% last year to a record $375.2 billion, and includes tariffs on imports of steel and aluminum as well as items like washing machines and solar panels.

And much more has been threatened. Mr. Trump said on Thursday that another $16 billion worth of tariffs against China are coming in two weeks — and U.S. total alone could reach $550 billion in the next few months.

The actions appear to be having the intended effect, if at the cost of pushing up inflation (prices for washing machine in the U.S. have spiked 16% in recent months, for example). The U.S. trade imbalance with China in May totaled $43.1 billion, down from the $47.2 billion posted in March; it’s the smallest monthly deficit since October 2016 and caps the largest three-month reduction in 10 years.

China responded early Friday with its own tariffs on a $34 billion range of American goods including soybeans and pork. The risk now is that the tit-for-tat that marked the verbal standoff will translate into escalation in action, as each side tries to one-up the other.

There are reports that American imports into China are being slow-walked through customs. Moreover, China’s currency has weakened markedly in recent weeks in a possible bid to offset U.S. tariffs — a strategy Trump frequently called out as “currency manipulation” on the campaign trail.

Much depends on how President Trump and the communists in Beijing play the next round in the trade war game. According to calculations by Goldman Sachs, if the full scope of Trump’s proposed protectionism is implemented, it would raise the total amount of goods subject to tariffs to nearly $800 billion. Or about four times the cumulative amount proposed just a few months ago.

China appears more vulnerable, with Societe Generale economists estimating that the Chinese economy could lose 1 percentage point of GDP growth and upwards of four million jobs while the U.S. would suffer a modest 0.2 percentage point drag on GDP growth.